Robert Bennett: Labor’s GDP share and economic efficiency

Every person who was involved in manufacturing the equipment
that made business more productive was PAID a wage for his labor. He has no
more claim on ownership than your lawn care service has claim on ownership to
your house.

People are paid to perform a service. In the United
States, no one us forced to perform labor without being paid. If you think that
labor means ownership, then let me now your lawn. Be sure to have the deed to
your property. You'll be giving that deed to me me at the end of the day.

GaryOVirginia Beach, VA

June 3, 2014 11:23 a.m.

No Alfred –

I don’t have it backwards. Do some research .
. . (BTW, lying Right Wing Websites are not legitimate sources).

And
yes, Communist countries also suppressed labor Unions.

Most American
jobs impacted by foreign competition were non-union jobs. How can you rightfully
blame labor unions for the loss of non-union jobs?

And No, I’m
not forgetting Jimmy Carter. It really wasn’t his fault that the price of
world oil climbed so high spurring stagflaton. And it wasn’t because of
Reagan that the price of world oil dropped to less than 1/3 the price it had
been during Carter’s administration.

And Tada . . . No Drama
Obama who got Osama has helped pull this nation out of the hole dug for it by
the GOP.

Thanks for recognizing that.

JoeBlowFar East USA, SC

June 3, 2014 5:45 a.m.

We hear constantly about the tax rates under Reagan and want to
"SELECTIVELY" apply them across the board.

We use them to
unequivocally state that when tax rates go down, revenue goes up and the economy
thrives.

And that is probably true when you drop the tax rate from
70% to 50% which is HUGE.

Under Reagan, when you take tax rates AND
tax brackets into account, Federal income taxes were significantly higher under
Reagan than they are today.

How about you address that Mr Bennett?

Why was a 50% tax rate under Reagan an economic windfall, but a 40% rate
today such a killer?

The answer takes selective spin in order to
justify lowering tax rates

ordinaryfolksseattle, WA

June 2, 2014 11:06 p.m.

Let us all face it. Unless you are a computer whiz, or can find a way to make
money in the financial sector, most of us are just out of luck. Oh, well you
could inherit money, or marry it...the old fashioned way to climb the economic
ladder.

The world became interrelated. Corporate America owes no
allegiance to the American public, only the stock holders who expect maximized
profit. This has meant outsourcing to cheap labor markets, and twisting the
convoluted tax codes to ship profits to cheap tax countries.

Nothing will change. The dominant political philosophy of the US is the free
market solution to all our problems. Free markets love globalization. You can
outsource any problem to cheap countries. And corporate America owns the
government lock, stock and barrel. Nothing to benefit the average person will
ever be passed by Congress, the Senate and signed by any President (Democrat or
Republican) that does not have the Chamber of Commerce seal of approval (or Koch
brothers too).

Get used to it America. The great dream is over.

AlfredPhoenix, AZ

June 2, 2014 7:57 p.m.

Esquire:"Alfred, in response to the comment that 'Labor Unions
tore down the Iron Curtain and destroyed Communism in Easter Europe...',
you said 'No, no. That was Reagan who told Mikhail Gorbachev to 'tear
down this wall.'"

I take your point. I had another curtain
in mind... rather a wall.

Actually, the Iron Curtain was not torn
down at all. How could it have been? It was a figment of someone's
imagination.

Mike Richards:"So, what is 'labor's
share' of GDP?"

Labor constitutes the lion's share
(probably 80 percent or more) of the cost of goods and services produced.
Interest and profit is the rest. And even interest is made up of labor... (bank
employees' wages where loans come from).

Even machinery,
buildings, vehicles, computers, etc., everything needed to run a business is put
together with... you guessed it, labor.

Iron ore is dug out of the
ground with labor. It is smelted with labor. Formed into products with labor.
And shipped to the end user with labor. Same with fuel from oil.

Of
course what American businesses buy from foreigners contains another countries
GDP labor.

10CCBountiful, UT

June 2, 2014 7:41 p.m.

1) Wages and Salaries make up a smaller portion of the GDP than they used to.

2) Wages and Salaries compose a very high percentage of overall consumer
demand.

Let's play this out, let's simulate what this
means:

- GDP growth is meager - even with multiple year priming by
the Fed - because there is less means (wages and salaries) for consumers to
consume.

- Investors & Capital look for opportunities to become
more efficient (ie, fewer employees), or they look for demand in emerging
markets.

- Consumers (the overwhelming number of people who raise
families) are less likely to produce as many children, or even get married to
begin with, something the D-News laments about once a month.

- Longer
term our flattening consumer spending and lower birthrate mean the GDP will be
flat, or possibly decline somewhat. This makes it unlikely that programs like
the F-35 fighter program can be fully funded.

- Investors, if you try
to get greater amounts of tax revenue from them, will simply move their money
offshore.

In my view the Fed's long term monetary policy is
producing meager GDP growth; In reality we should be shrinking, modestly,
reflecting smaller wages & salaries.

wjaldenCottonwood Heights, UT

June 2, 2014 7:32 p.m.

Automation and free trade have undeniably been a big part of this story. But
there is one more part of the problem Bennett refuses to address, because he is
part of the problem: mass immigration.

There are millions of jobs
that can't be performed by machines, and which cannot be done in a factory
in China. They must still be done in person, in America. Except our government
has allowed thousands of employers to import tens of millions non-Americans,
legally and illegally, to do these jobs on American soil. If they can't
move the job to the foreigner, the government lets them bring the foreigners
here, to undermine wages here. As senator, Bob Bennett was fully complicit with
that betrayal of the American people.

Nice try, Bob. Thanks for
selling us out.

Mike RichardsSouth Jordan, Utah

June 2, 2014 4:27 p.m.

Some people like to redefine GDP so that they can promote their favorite cause.
Wikipedia defines GDP as "Gross domestic product (GDP) is the market value
of all officially recognized final goods and services produced within a country
in a year, or over a given period of time."

So, what is
"labor's share" of GDP? That's like asking what the local
power company's share of GDP is, or the local gas company, of the local
water company.

Every product that is manufactured has an associated
cost. It has the cost of raw materials, the cost of labor to convert those
materials into something of value and other associated costs.

We
could demand that all restaurants cook our meals on hot rocks or that all water
served to us be hand carried from a communal well. We don't. Why? Because
there are better ways to cook our food and furnish us with water. Some people
think that labor should go back to 1913 when Henry Ford introduced the assembly
line. Why not go back to 1890 and require us all to drive a horse drawn
carriage?

EsquireSpringville, UT

June 2, 2014 3:30 p.m.

@ Alfred, in response to the comment that "Labor Unions tore down the Iron
Curtian (sic) and destroyed Communism in Easter Europe...", you said
"No, no. That was Reagan who told Makhail (sic) Gorbachev to 'tear down
this wall.'" Wow. Either Reagan had god-like powers, or that
statement is based on a simplistic fantasy. It has to be one or the other. I
mean, wow...

@ GaryO, I have to disagree with one thing you said:
"[Reagan] wasn’t a bad actor." He was.

AlfredPhoenix, AZ

June 2, 2014 2:31 p.m.

GaryO:"In nations where labor unions were put down and suppressed,
Communism took over..."

I think you have it backwards... Labor
unions were put down and suppressed by Communist leaders.

True... and labor unions, due to obscenely high
wages and benefits, killed jobs (and eventually themselves)... employers moved
businesses overseas where labor was cheap. Good-bye unions.

"We
need to avoid excesses, like the kind of horrible governance modern
'Conservatives' offer to us."

What excesses are you
referring to? The size of government? Big government is where Democrats
excel.

"And yes Ronald Reagan obediently recited the lines
written for him. 'Tear down this wall.'"

All presidents
use writers for speeches.

"He wasn’t a bad actor, but he
was possibly the worst President the twentieth century."

You're forgetting Jimmy Carter. And, for the current century we have,
tada, Barack Hussein Obama.

GaryOVirginia Beach, VA

June 2, 2014 1:40 p.m.

Alfred

Perhaps I can help clear up some of your confusion.

LDS Liberal said "The Labor Unions staved off Communism in
America..."

How you ask? . . . Labor unions allowed the working
man to get a fair wage and work in safer conditions. In nations where labor
unions were put down and suppressed, Communism took over because the hopeless
situation of laborers gave them no other option than to seek a change in
government.

Here, with strong labor unions, employers were forced to
provide safer conditions and livable wages. Over there, laborers had no recourse
except to revolt against oppression.

When the pendulum swings too far
in one direction, it swings back too far in the other direction, sometimes with
devastating results.

We need to learn from history. Moderation is
the key. We need to avoid excesses, like the kind of horrible governance modern
“Conservatives” offer to us.

And yes Ronald Reagan
obediently recited the lines written for him. “Tear down this
wall.”

He wasn’t a bad actor, but he was possibly the
worst President the twentieth century.

Tyler DMeridian, ID

June 2, 2014 10:48 a.m.

Senator Bennett is right as far as it goes (does anyone really think that in the
future most of our necessities and even many “wants” will NOT be
produced through automation?) , but he ignores the more fundamental question
– namely, what does a world look like where human labor is not needed for
these things?

In other words, will people be able to earn enough to
live, let alone flourish, in a world that resembles Star Trek (e.g., with
replicators to manufacture pretty much anything)?I don’t know what
the answers are but I suspect they will arise in countries that remain free,
democratic and do not allow big business to become a new feudal oligarchy.

But I am also highly skeptical the answers are found in the writings of
a 19th century iconoclast who wrote virtually nothing by way of answers (which
may explain why when his “answers” were tried in the 20th century
they were a disaster).

But I could be wrong…

Roland KayserCottonwood Heights, UT

June 2, 2014 10:27 a.m.

I'd also like to point out that just because 90% of Americans used to be
farmers doesn't mean that they got 90% of GDP. That one fails any basic
logic test.

AlfredPhoenix, AZ

June 2, 2014 10:18 a.m.

"The Labor Unions staved off Communism in America..."

What?
If anything I think it was the US Constitution setting up a government by, for,
and of the people.

"Labor Unions tore down the Iron Curtian and
destroyed Communism in Easter Europe..."

No, no. That was Reagan
who told Makhail Gorbachev to 'tear down this wall.'

"Why do you think Labor Unions are illegal in Communist China, North Korea
and Cuba?"

Because those countries have dictatorshipa. Nothing
more.

wrzPhoenix, AZ

June 2, 2014 10:07 a.m.

Sorry Bennett, but you missed the salient point. It's not that
complicated.

Starting about 1986 (and maybe even before) when
President Reagan gave amnesty to millions of illegals, immigratants (legal and
otherwise) have been pouring into this country providing a dramatic oversupply
of labor. The net result... stagnation/deprssion of wages and decrease in
labor's share of GDB.

The Real MaverickOrem, UT

June 2, 2014 10:05 a.m.

If technology was the reason for so many loss of jobs and middle class, why
isn't Finland, Germany, Canada, Sweden, and Australia seeing similar
trends?

Technology isn't this death knell that the repubs are
making it out to be. Corrupt and backwards tax codes which benefit the rich and
the destruction of unions are.

Kent C. DeForrestProvo, UT

June 2, 2014 9:33 a.m.

Excellent comments on a clueless editorial. Bennett is basically saying,
we've shifted from a labor-intensive economy to a machine-based economy.
Get used to it, because there's nothing we can do. Unfortunately, this
appears to be the GOP's take on the economy they created (as GaryO so aptly
pointed out).

But simply assuming that more and more money should
flow toward the owners and controllers of capital and less and less to those who
must work to eat and provide shelter for their families is not sustainable even
in the intermediate term, forget the long term.

Of course, this all flies in the face of Republican devotion to
supply-side dogma (which gave us the mess we have), so we can't expect
change until we start voting the plutocratic obstructionist party out of office.

Roland KayserCottonwood Heights, UT

June 2, 2014 9:33 a.m.

You can explain it any way you want to, but it boils down to this: American
corporations are paying their workers far less than they used to and they are
keeping the difference for themselves. This results in lower standards of living
for anyone who works for a living, and far higher standards of living for the
tiny minority of people who control the corporations.

LDS LiberalFarmington, UT

June 2, 2014 8:45 a.m.

Oh good grief...

I can only wonder how much $ Senator Bennett was
Free Speeched "paid" for writing this article?

Labor Unions
CREATED the Middle class Senator, and the demise of them, is the very
reason for demise of the Middle Class today.

FYI -- It was the
robber Baron's of the 1800's who imported cheap "illegal"
immigrant Chinese labor to build their Railroads to make themselves insainly
wealth, and skew labor wages and lack of safety...

It was the
Labor UNIONS who drove out the illegal immigrant labor, demanded more of
the GDP, demanded better and safer working conditions,

and
created the Middle Class.

BTW - as a side note --

The
Labor Unions staved off Communism in America, and Labor Unions tore
down the Iron Curtian and destroyed Communism in Easter Europe...

Why
do you think Labor Unions are illegal in Communist China, North Korea and Cuba?

GaryOVirginia Beach, VA

June 2, 2014 8:40 a.m.

Uh huh Mr. Bennet, because machines do so much of the labor now, workers do
less, and therefore fewer workers are required . . . and that’s why labor
is decreasing as a share of GDP?

That’s just the way it is,
huh?

A corollary to that premise is that unemployment is and should
be the norm in the United States.

I disagree.

There is
more than one way to calculate the GDP, but the one that applies here is the
Income Approach:

The change since the 1980’s is the decrease of labor wages vs increase
in profits.

And it’s a direct result of Reaganomics, which gave
huge tax breaks to high earners, thereby giving a greater advantage to huge
operators. Smaller operations, once a much greater player in providing labor
wages, became much less competitive comparatively, and they were forced out of
business.

Reaganomics tampered with a system that worked, and left us
a mess in its place.

pragmatistferlifesalt lake city, utah

June 2, 2014 7:55 a.m.

Good explanations Marxist.

When I read this my first thought was that
it is almost childish to describe labor as manufacturing and then explain away
an entire economies labor capital differential with the idea that we just use
less labor.

Very disappointing and partisan. This kind of thinking
gets us no where.

If I were to get simplistic about this topic I
would encourage a discussion that helps bring back value added labor with unique
skills and circumstances. This is the situation that requires employers to pay
adequate wages and helps lift all.

marxistSalt Lake City, UT

June 2, 2014 1:45 a.m.

OK, I had forgotten that it is possible to take an "incomes" approach to
GDP determination. So with apologies to Piketty maybe I (and Senator Bennett)
have made this analysis a little too complicated. An incomes approach could be
as follows:

Beginning in the early 1970's there
began a tremendous shift of labor from union shops to non-union shops, dominated
by services. The non-union shops tend to be much lower wage. This has led to a
decreased percentage of GDP accounted for by wages.

But as the late
Cambridge economist Joan Robinson said at the Tanner Lectures in 1981 - there is
no reason to denigrate service work. Service work is on a par with assembly
line work. The solution? Organize the service workers. This we should do.
Why?

To restore balance to the system. Besides what is the purpose
of economic life? Is it to struggle in low wage employment with the wolf at the
door constantly, finally collapsing when one's life forces are spent? I
don't think so. Unionization is the answer!

marxistSalt Lake City, UT

June 2, 2014 12:41 a.m.

Well let me see if I understand what the senator is saying. In economics 101 we
learn that GDP breaks out as follows GDP = Consumption (what households buy) +
Investment (what businesses buy including production equipment) + Government
Expenditures + Net Exports.

So the purchases of production equipment
by auto plants would bulk up Investment as a percentage of GDP, but that is far
from the same as increasing returns to capital, which is of much greater
interest and concern.

Senator Bennett does not explain the much
higher returns to capital ownership as opposed to the lesser returns to labor.
For that we need to go to somebody like Piketty, who is preoccupied with the
returns to capital as opposed to the overall rate of economic growth.

According to Piketty when the rate of return on capital greatly exceeds the
rate of economic growth, “the past tends to devour the future”:
society inexorably tends toward dominance by inherited wealth. Wealth becomes
more concentrated. Society becomes more unequal.

Senator
Bennett's explanation falls short of what is needful and relevant.